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Unpaid holiday, unlimited roll over

A recent European Court of Justice case has found that where workers are not paid for annual leave, their annual leave entitlement will roll over indefinitely. At the end of their employment, they are then entitled to payment in lieu of their accrued entitlement, apparently without limitation.

In the case, Mr King, a commission-only salesperson for The Sash Window Workshop, worked for 13 years for the company and never received any holiday pay. When he was dismissed, he brought a claim for, among other things, 13 years’ unpaid annual leave.

The European Court of Justice decided that as Mr King had not been paid for his annual leave, he had effectively been prevented from taking it. As such, his annual leave entitlement rolled over from one year to the next and he was entitled to a lump sum payment at the end of his employment. It was irrelevant that The Sash Window Workshop had made a mistake when treating Mr King as self-employed – it was their responsibility as employer to get it right.

The really worrying thing here for employers is that the annual leave entitlement rolled over year on year without the company or Mr King knowing. In Mr King’s case, it looks like his claim is worth around 52 weeks’ pay. The time limit for bringing a claim only started running once Mr King’s employment was terminated by the company. For employers, this means that they could have already built up big liabilities across their workforce without even knowing about it.

The case looks like it will open up a run of new unpaid holiday claims. Where employers have classified workers incorrectly, taking steps to fix the problem may risk tipping workers off to potential claims. The best course going forward is for employers to identify where these liabilities might lie, how much they might cost, and what contingency plans need to be put in place to soften the blow of future claims. Prevention is better than cure, so if you have self-employed workers in your workforce, we suggest carrying out a workplace audit to weed out potential claims and review whether you could defeat a challenge by them that their deemed self employed status is a sham and in fact they are workers or employees and entitled to associated statutory rights.

We act for businesses of all shapes and sizes and in many different sectors. Our advice covers all aspects of the employment relationship, helping to settle disputes, defending employment tribunal claims and providing immigration compliance audits.

Partner/Head of Employment

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